FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Pat is a real estate developer.
A few years ago, Pat purchased Elysian Fields Farm for $1,100,000. The property included 120 acres of undeveloped land on which there was a small lake plus three acres that included a beautiful farmhouse and a few barns. At first, Pat had only been interested in the undeveloped land. However, rather than sell the 120 acres of undeveloped land to Pat for $800,000, the original owner was only interested in selling the entire estate, for $1,100,000. Pat quickly agreed to the counterproposal, and after the deal had closed, Pat immediately went to work improving Elysian Fields. Pat obtained approval to subdivide the land into 60 two-acre plots and the three-acre farmhouse lot. Pat was quickly able to sell the three-acre farmhouse lot for $300,000. So far, Pat has sold all 10 two-acre lots with lake frontage for $150,000 each and 10 of the other 50 two-acre lots for $30,000 each.
How much gain has Pat realized?
What is the gain on the sale of all 10 lakefront lots.
What is the gain on the sale of the other 10 lots
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